China's oil demand is poised to rise the most in two years this quarter as the world's second-biggest crude user shows signs of weathering a global economic slowdown that's cut Brent prices 17 percent since March.

 

Consumption will jump at least 400,000 barrels a day in the three months ending on December 31 from the previous quarter, according to the International Energy Agency and Sanford C. Bernstein & Co. The increase would be the biggest since the final quarter of 2010 and compares with estimated net global growth of 290,000, IEA data show. Refiners, including China Petroleum & Chemical Corp and PetroChina Co, processed record crude volumes in September and imports rebounded from three months of declines.

 

China, which buys over half its crude overseas, has boosted fuel output amid speculation that gains in industrial production and retail sales in September continued into last month. Refiners are boosting supplies for factories and vehicles after cutting inventories to the lowest level in almost a year in August, according to analysts from Barclays Plc to Bank of America Corp.

 

"Diesel and gasoline inventories remain below historic averages and we expect continued strong growth in refining through to the fourth quarter to rebuild," Neil Beveridge, a Hong Kong-based analyst at Bernstein who predicts China's quarterly demand will rise 600,000 barrels a day, said by e-mail last week. "The third quarter was an unusually weak quarter. The fourth quarter is usually stronger."

Brent crude, the benchmark grade for more than half the world's oil, has slumped since peaking on March 1 at US$128.40 as the European debt crisis threatens to derail the global economic recovery, contributing to seven consecutive quarters of slower growth for China. London-traded Brent closed at US$106.82 on the ICE Futures Europe exchange on Wednesday.

 

China's commercial stockpiles of fuel were little changed in September after sliding in August, data from Xinhua news agency's China Oil, Gas & Petrochemicals newsletter showed on October 22. Diesel supplies were near a 10-month low at 7.93 million barrels after dropping 15 percent to 7.91 million in August. Gasoline inventories were near the lowest in 11 months at 5.72 million barrels after sliding 6.9 percent the prior month.

 

Crude imports and processing rebounded in September as industrial production accelerated for the first time in four months and retail sales expanded at the fastest pace since April, according to government data released last month.

Imports, processing riseNet crude purchases from overseas climbed to 4.86 million barrels a day after falling for three straight months to a two-year low of 4.31 million barrels a day in August, data from the customs bureau showed on October 13. Refinery throughput rose to a record 9.47 million barrels a day, data from the National Bureau of Statistics showed on October 18. The volume slid to an eight-month low of 8.79 million barrels a day in June.

 

China Petroleum, known as Sinopec, will boost processing 9 percent this quarter while PetroChina plans to raise its throughput by 4 percent, Shanghai-based C1 Eneregy, said in a report yesterday.

 

China's industrial output and retail sales both rose faster in October than in the previous month, according to the National Bureau of Statistics.

 

"The worst slowdown is past us and looking ahead, we think it's going to improve," Sijin Cheng, a Singapore-based analyst at Barclays, said by phone. "Oil demand will improve gradually from the past six months as refiners have destocked from previous high levels and China is heading into a winter stockpiling season. Although downside risks remain, demand troughed earlier in the year and is likely to rise modestly." 
 

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